The dollar edged lower against a basket of currencies on Monday, snapping a five-day rising streak as investors took profits before a US central bank meeting this week, and the Swedish crown fell on pension-related outflows. The Fed is widely expected to raise interest rates at its two-day policy meeting that will end on Wednesday, and is seen possibly tightening two or three times in 2018. But still-sluggish inflation and wage growth has clouded next year's policy outlook.
"I think this (the dollar's retreat on Monday) is being driven by the softer earnings data we saw in the payrolls report on Friday which reinforces the Fed's current policy dilemma, where yes we have solid growth but so far a lack of inflation pressure," said MUFG currency strategist Lee Hardman. US employment data on Friday showed a bigger rise in jobs than expected in November, but pay growth remained moderate. The annual increase in wages rose to 2.5 percent, from 2.3 percent in October but remained sluggish.
The dollar dipped 0.2 percent to 93.763 against a basket of major currencies, pulling away from a two-week high hit on Friday. The Swedish crown was among the biggest losers, hitting a 13-month low of 10.0285 crowns per euro, down 0.7 pct on the day. It has weakened more than 5 percent in the last two months.
Investors have been spooked by rising levels of household debt just has Sweden's long-soaring property market has started to dip. A survey on Monday showed more Swedes expect house prices to fall than to rise over the next 12 months for the first time in more than five years. Adding downward pressure on the currency were annual pension fund-related outflows from Sweden amounting to roughly 26 billion Swedish crowns ($3.06 billion), according to SEB strategists.
The Swedish Pension Agency pays out pension capital annually to mutual funds chosen by Sweden's pension savers with a large share of their savings going to foreign assets. Most of these outflows are bunched in the last few weeks of the year, weighing on the currency. "Moreover, any sign of softening in house prices may prompt the central bank to delay their plans of rolling back their stimulus plans," said Richard Falkehnall, a senior FX strategist at SEB in Stockholm.
Not for the first time in recent weeks, bitcoin stole the spotlight, as futures of the cryptocurrency began trading on Cboe Global Markets. Bitcoin was up around 12 percent at $16,488 on the Luxembourg-based Bitstamp exchange, just shy of an all-time high of $16,666.66 hit on the exchange on Friday. The most-traded futures contract opened at $15,460 before leaping to a high of $18,700 - a gain of 21 percent. They last stood at $17,500.